The real story comes from the history of the Sayama incident (狭山事件 sayama jiken). There seem to be too many coincidences between the Sayama incident and this movie to ignore.

The Sayama incident occured in May 1963. It's quite an important case for discrimination in Japan. The case goes that one day, in Sayama (in Saitama prefecture), a young girl was kidnapped for ransom, raped and then murdered. Her older sister apparently found her body, but was so traumatized by it, when asked what she had seen, she merely said "I met a large Tanuki (looks like a racoon)" and "I saw a cat monster." Sound familiar? Anyway, the older sister later commited suicide.

So let's see. Okay I'll start with the things that are most similar. For one, the house that the family moved to is also in Saitama. It isn't told exactly where, but take a look at this:

The Nekobus (the cat bus) is the cariage that takes one to the next world (heaven, hell, whatever). This is given a little reinforcement by the above picture, showing the destination as 墓道, the first character means grave, the second meaning road.

So in the story, the idea is that Mei is murdered after she goes missing. Satsuki, feeling greif decides to join her.

She enters into the realm of the Shinigami (death god) - Totoro. Notice the presence again of the Susuwatari. And the monochromatic lighting. She hops into the Nekobus; the vehicle to the next world, and they go to see their mother together, but they don't actually meet her.

There is a strong belief that after Mei goes missing, she has no shadow, apparently adding to the notion that she is dead. When I watched the movie again I found it hard to distinguish between what would be called a shadow or not so this is in debate.

One thing I did notice, though, was that Satsuki and Mei seem to be colored differently (like... more softly?) once they are both on the Nekobus.

You may ask yourself about the ending credits, which show a happy Mei and Satsuki along with the mother and friends. The favoured explanation is that these are memories from when they were still living.

Another yet stranger rumor is that the movie is segmented; some parts are the present, some are the past or future, some are the work of the father's imagination. This seems a little off until you remember the scene with the huge tree. The children sit atop this huge tree (which umbrellas the small house) playing flutes with the Totoros.

The father looks out to see this, smiles happily and continues his writing. The suggestion is that he is writing about his deceased daughters doing exactly what they are shown doing.